What food-cost percentage should you aim for?

How to work out food-cost percentage

If the ingredients in a dish cost 900 a portion and it sells for 3,000, in any currency, its food cost is 900 ÷ 3,000 × 100 = 30%. How to calculate food cost shows where the cost per portion comes from.

What range is usual?

Industry guidance for restaurants most often puts food cost at roughly 28–35% of menu prices, and many operators start from 30%. Treat those figures as rules of thumb, not standards. They come from restaurants with paid staff and rent, published figures differ from source to source, and none of them knows your costs.

A food-cost percentage well above your target is a prompt to look again at the recipe, the portion or the price. A percentage far below it is worth a look too: it can mean a price your customers find too high, or portions smaller than they expect.

Why the right target differs between kitchens

Food is only one of the costs a price has to cover. Everything you take in is shared between food, labour, overheads and profit, so the less you spend on labour and overheads, the more room there is for food.

• Home cooks and small caterers often have low rent and few paid staff, so they can run a higher food-cost percentage and still make money, as long as their own time is counted somewhere.
• Full-service restaurants pay rent, wages and service costs every day, which usually pushes the food target lower.
• Dishes built on expensive ingredients, like whole fish or prime steak, tend to run at a higher percentage, yet can still bring in more cash per plate than a cheap dish at a low one.
• Bakeries and pastry kitchens use fairly cheap ingredients but a lot of skilled time and oven time, so a low food-cost percentage can still leave a thin profit.
• Drinks bought ready-made to resell need almost no labour, so they are usually judged on their cash margin rather than a food-cost target.
• Catering jobs carry costs that happen once per event, such as transport, hired equipment and extra hands. These are easier to price as their own lines than to squeeze into a food-cost target.

Work out your own target

Start from your other costs instead of a rule of thumb. Write labour, overheads and the profit you want as percentages of your sales; what is left is the most you can spend on food.

In this example labour takes 30% of sales, rent and other bills take 25%, and the owner wants 10% profit, so food can take at most 35%. If you do not know your own shares yet, start with a common target, cost every dish, then compare with your real figures after a month of trading.

Worked example: pricing from a target

Take a dish whose ingredients cost 900 a portion. Each price below is that cost divided by the target.

The lower the target, the higher the price: moving from 35% to 25% takes this dish from 2,571.43 to 3,600. A price also has to make sense to your customers. If a target gives a price far above what your market pays, look at the recipe first (the portion size, a cheaper protein, less waste) before settling for a thinner margin.

Food-cost percentage and margin

When cost means food cost only, food-cost percentage and gross margin add up to 100%: a dish at 30% food cost has a 70% gross margin. Count labour and packaging as well and the margin on the full cost is lower. Markup vs margin explains the two ways of describing profit.

Check it against reality

Recipe costs give you a theoretical food cost: what a dish should cost if every portion is the right size and nothing is wasted. Your actual food cost for a period comes from what you bought and what you sold.

If the actual figure runs well above the recipe figures, common causes are waste, over-portioning, theft and prices that have risen since you last costed. Recost a dish when one of its main ingredients changes price, and work out your actual figure every month.